Question

The imputation system encourages payment of high dividend. Companies that pay significant dividend may be left short of cash. Comment on this statement.

Answer 1

**Attribution framework empowers installment of high profit as it disposes of twofold tax collection on profits. Profit is paid from the total compensation of an organization, which is as of now net of assessments. In the event that the profit salary of investors is burdened once more, at that point it turns into the instance of twofold tax collection. For instance, an organization paying 20% duty rate will pay 20% of its all pre-charge income as expenses. From the profit after duty, the organization delivers out profits. Presently, on the off chance that the profit is charged at, state 10%, at that point all out expense on the profit adds up to 20% + 10% = 30%, consequently twofold tax assessment.

**Nations, for example, Australia, Canada, Chile, Korea, Mexico, and New Zealand follow attribution framework. Expenses on profit circulation diminishes the net profit pay of the investors. Along these lines, in the ascription framework, organizations deliver higher profit as a financially savvy methods for riches move to investors.

**Be that as it may, the flipside to high profit is its effect on income. Since profit is an immediate money surge, except if its a stock profit, high profit installment can lessen the net accessible money for an organization. This thusly may need to revamp the working capital prerequisites of the organization to guarantee adequate free income to the firm.